Reviewing the reviews: charity law, regulation and red tape

August 10, 2012 at 15:27

Charity law and regulation and its implementation, not normally issues to excite the sector, have been given unusual prominence lately and are certainly keeping those with an eye on charity policy busy this summer. Last month we had both the publication of Lord Hodgson’s much anticipated independent review of the 2006 Charities Act and the closure of the Charity Commission’s consultation on the charity register. Our civil society minister, Nick Hurd MP, has written to sector leaders seeking input to the Government response to the Hodgson review, submissions for the Civil Society Red Tape Challenge are due in September and a forthcoming Law Commission project will examine issues concerning the constitution and regulation of charities.  And as if this wasn’t enough for the sector to contend with, the political classes also keen to get in on the act, quite literally, and will get their teeth into these issues in the autumn when the Public Administration Select Committee (PASC) conducts its own review of the Charities Act.

Those not familiar with policy reviews, consultations and similar would be right to feel confused by this plethora of overlapping consultations – however, in the lengthy process of policy and legislative reform they can each be useful levers for change.

Lord Hodgson’s independent review, sanctioned by the Charities Act itself (the first ever Act of Parliament to have an automatic review procedure built into it), looked at the operation and effectiveness of the 2006 Act and changes that could improve the legal and regulatory framework. The comprehensive review also attempts to ‘peer into the future and anticipate changes in the sector’. Whether any government would have willingly chosen to carry out a review of the Act so soon, or to prioritise the charity legal framework to the extent that this review has forced them to, is doubtful.

That the findings of Lord Hodgson’s definitive review propose evolution not revolution is a vote of confidence that our existing regulatory framework is strong and instils trust in charities. The vital principles he identifies that underpin his recommendations espouse the type of regulatory system we want to have in the 21st century: charitable status as privilege not a right, the importance of the voluntary principle, independence, the role of judgement not process, transparent and proportionate regulations, all go to the core of what charity is about and how it should be regulated.

While these general principles help to set the context, Lord Hodgson certainly hasn’t held back from addressing some of the more sensitive matters in the sector and taking a bold stance in some of his recommendations.  Whether one agrees or not with the resulting proposals (and many in the sector don’t), we can’t deny that fundraising, charitable collections, trustee remuneration and charges for regulation – issues that never fail to divide opinion – all get considered treatment.

From CFG’s perspective, we particularly welcome proposals to:

  • streamline processes between Charity Commission and HMRC for registering charities and the submission of accounts
  • abolish the Summary Information Return
  • support the development of the social investment market.

But it’s not all positive, and we have particular concerns about recommendations to:

  • withdraw Gift Aid as a sanction for late filing of accounts and Annual Returns
  • charge for the registration of new charities
  • raise the thresholds for compulsory registration to £25,000
  • give the Charity Commission power to delegate some or all of its functions to other bodies.

It’s worth remembering though that Lord Hodgson’s recommendations only reflect the views of an independent reviewer:  which changes will be taken forward is a decision for government, the Charity Commission and the sector – and this is where the other consultative processes can lend a helping hand.

This week civil society minister, Nick Hurd MP, has written to sector leaders seeking views on which of the 113 recommendations to prioritise – Government’s criteria for prioritisation being those recommendations that have the highest impact through promoting public trust and confidence or making it easier to set up and run a charity.  While it is a further opportunity to shape the outcome, in reality, decisions will inevitably be influenced as much by the limited legislative timetable, competing policy and resourcing priorities of the respective government departments and a desire for quick wins.

The timing of the Charity Commission’s own review of the information it collects for its register, which closed shortly after Hodgson published his findings, is also a convenient coincidence. The consultation picked up a number of his recommendations that fall purely or partly within the Commission’s remit (e.g. summary information return, fines for late filing, suspending Gift Aid for late filers, scope of the register). In all, this should put the Commission in a better position to understand the sector’s concerns and interests and to make informed decisions,  in the context of its resource constraints, about which areas it can realistically prioritise.

Of the 113 of Lord Hodgson’s recommendations, nearly 30 require primary legislative change. Some of the more technical points will be picked up and addressed through the Law Commission’s (an independent body that promotes legal reform) review of charity law e.g. powers of the Charity Tribunal, points arising around charity mergers and the working of the cy-près rules. While this itself will be a lengthy process – a consultation is due to be launched at the end of 2013 – it does provide a relatively clear path forward.  If the project proceeds to a final report with a draft Bill, we could anticipate a further Charities Bill in the early stages of the next parliament.

Thrown into the mix are two other review processes – the outcomes of which are less clear.. The Cabinet Office is running a Civil Society Red Tape Challenge (RTC), with a spotlight on pinpointing unnecessary regulation related to giving time and money, running a voluntary or community organisation and social investment.  The word on the street is that the RTCs can, in theory, be an effective way to challenge legislation where it should be easier to address issues that cut across departments.  Submissions are reviewed by a Ministerial ‘Star Chamber’, which includes Oliver Letwin MP and most likely Nick Hurd MP, with the presumption that all burdensome regulations will go unless the relevant departmental civil servants involved can justify why they are needed. Well-defined and necessary regulation is kept.

Cabinet Office describes this as ‘a dramatic shift in the culture of Whitehall, as we work together collaboratively to turn the regulatory default on its head.’ This process, we think, offers Cabinet Office a useful lever over other departments and may help in taking forward some points around the likes of health and safety legislation that fall outside Lord Hodgson’sremit, but have been raised during the process. It may also give greater impetus to some of the commitments arising from Lord Hodgson’s ‘Unshackling Good Neighbours’ published over a year ago. (e.g. joined up processes for filing account with Charity Commission and Companies House)

In many ways the misfit amongst all these reviews is the Public Administration Select Committee’s (PASC) inquiry, where a cross bench committee of MPs will conduct it’s own review into the operation of Charities Act in the autumn. Terms of reference aren’t just limited to the Act however, as the review will take in political campaigning and explicit questions around whether there are too many charities. PASC has an occasionally spikey relationship with the sector and while certainly making a valuable contribution to the democratic process by holding government to account, its members have been known to be outspoken at times. Past sessions where the charity sector have come under its scrutiny have resulted in headlines about the ‘tescoisation’ of charities, CEO salaries and accusations of the sector engaging in ‘business protection campaigning’. In the autumn it will undoubtedly once again raise the profile of a number of contentious issues like fundraising and political campaigning.

For a sector that often demands more consultation and engagement – we certainly have it in bucket-loads on charity law, regulation and red tape. The forming and storming of ideas this involves can in itself often be a contructive proceess. However it’s also important we enter these reviews with our eyes open and ready to stand up for the sector on contentious issues. Failure to do and ensure we’re representing out constituents views  can only lead to poorer outcomes for all.  With so much up for debate we need to make sure we’re focusing our efforts on those ideas and recommendations that will make life easier for charities, preserve the integrity of the sector and can realistically be delivered. Pulling those out from the many that are in the mix at present is not necessarily an easy task.

See CFGs submission to the Review of the Charities Act, our reaction to Lord Hodgson’s recommendations, and our response to the Charity Commission consultation on it’s information strategy.